Tesla Gets Slammed by Tesla

When will investors get tired of feeding their capital into this cash-burn machine?

Tesla shares plunged 8.2% during regular trading hours on Tuesday and another 2% in after-hours trading to $272.50, below where they’d been a year ago ($277.45), and down 28% from September 18, when the market still had hopes for the Model 3.

The unsecured junk bond due in 2025 with a 5.3% coupon – which Tesla sold last August when its stock was still over $357 a share – dropped to a record low of 89 cents on the dollar in after-hours trading.

During a nasty day on the stock market, wunderkind Tesla got hammered by Tesla reality.

At first it was the NTSB

The National Transportation Safety Board announced that it was sending investigators to California to investigate the fatal and fiery crash of a Model X on Friday morning that had shut down a carpool ramp and two lanes of Highway 101, the Silicon Valley artery, for almost six hours, twice as long as most accidents of this type, according to the California Highway Patrol. NTSB said it would examine various issues, including the post-crash fire and removing the vehicle from the accident site.

This is the second NTSB field investigation into the crash of a Tesla this year. In January, the NTSB opened an investigation into the crash of a Tesla — apparently in semi-autonomous mode — and a fire truck.

In the accident on Friday, the Model X hit a freeway divider, then was hit by a Mazda, and crashed into an Audi. The lithium-ion cells caught fire. The driver of the Tesla perished. The fire department ended up calling Tesla to determine how to extinguish the fire, as the exposed batteries were also an electrocution hazard.

Then it was Moody’s.

During after-hours trading, Tesla got hit on the credit side with a resounding downgrade from Moody’s, which specifically:

Cut the corporate credit rating by one notch to B3, just above deep-junk Caa1.

Cut the unsecured-note rating one notch to Caa1

Cut the Speculative Grade Liquidity rating to SGL-4 from SGL-3.

Changed the outlook from stable to “negative.”

Moody’s cites these reasons:

Tesla’s ratings reflect the significant shortfall in the production rate of the company’s Model 3 electric vehicle.

Tesla produced only 2,425 Model 3s during the fourth quarter of 2017; it is currently targeting a weekly production rate of 2,500 by the end of March, and 5,000 per week by the end of June. This compares with the company’s year-earlier production expectations of 5,000 per week by the end of 2017 and 10,000 by the end of 2018.

These are just Tesla targets. Tesla never hits its targets. It overpromises to hype its shares. It didn’t overpromise, however, its “manufacturing hell,” as CEO Elon Musk put it so eloquently. And the few Model 3s now driving around out there appear to be beta-versions with scads of quality problems. Moody’s goes on relentlessly:

The company also faces liquidity pressures due to its large negative free cash flow and the pending maturities of convertible bonds ($230 million in November 2018 and $920 million in March 2019).

The negative outlook reflects the likelihood that Tesla will have to undertake a large, near-term capital raise in order to refund maturing obligations and avoid a liquidity short-fall.

Tesla has a lot of debt. Among the $23 billion in liabilities are: $10.2 billion in long-term debt and $854 million in customer deposits, according to its annual report. Tesla also had considerable liquidity at the end of December, including $3.4 billion in cash and securities, and a “moderate availability” under its $1.9 billion asset-based loan facility (some of which has been burned up in Q1). But Moody’s says that this is “not adequate to cover:”

1. The approximately $500 million in minimum cash that we estimate Tesla must maintain for normal operations;

2. A 2018 operating cash burn that will approximate $2 billion if Tesla maintains high discretionary capital expenditures to increase capacity; and

3. Convertible debt maturities of approximately $1.2 billion through early 2019.

These cash needs will likely require Tesla to undertake a near-term capital raise exceeding $2 billion. Moreover, if the company maintains its expected pace of expansion, it will likely need to raise additional capital during the second half of 2019.

Moody’s threatened that ratings could be cut even lower if:

There “are shortfalls from its updated Model 3 production targets”

And if Tesla “is unable to raise sufficient new capital to cover its late-2018 and early-2019 convertible maturities, and to cover the operating cash consumption that will likely continue into 2019.”

Standard and Poor’s rates Tesla B-, one notch above CCC, and on a par with Moody’s lowered B3 rating.

Despite the drop on Tuesday, Tesla’s shares are still inexplicably above the single digits, considering how much it loses year after year, for ten years in a row, with every sign pointing to even bigger losses going forward, and how much investor-cash it burns at an accelerating rate, year-after-year, and considering the endless false promises and hype and the truly amazing “manufacturing hell” that is unequaled among automakers.

Once the true believers in this stock finally walk away and the shares go where they belong, Tesla’s debt will get in trouble. The reason is simple: The entire premise of the creditors is that Tesla will always have a high share price, and so it can always sell more shares to raise more money to service its debt. But once issuing more shares becomes difficult in an unwilling market, creditors won’t be able to figure out how on earth (not Mars) Tesla is going to pay them interest and principal, with no new money coming in, while also burning several billions a year on its operations.

Once this powerful cash-burn machine can no longer fuel itself by selling new shares and new debt, it’s a scenario for default. Moody’s would then slap a “D” rating on the company and its debt, by which time most investors have already watched their capital go up in smoke.

96 comments for “Tesla Gets Slammed by Tesla”

> When will investors get tired of feeding this cash-burn machine with capital?

As soon as they learn that “human error” is crash investigators’ abbreviation for “not caused by a mechanical failure” rather than some kind of indictment of mankind.

d

Mar 28, 2018 at 8:39 pm

NO

“Human Error” is nice speak for “OPERATOR FAULT”.

Which is not a nice or neutral term to use, when somebody is lying in the Mortuary, as the result of a “Human Error”.

Steve

Mar 28, 2018 at 8:04 am

Tesla has done some great things, but at the end of the day the large car companies will stomp all over them. Within a few years they will be back as a niche sports cars maker.

Nick

Mar 28, 2018 at 11:04 am

So Steve what have they done that has been so great? I’d love to know………how have they really impacted humanity, the environment, the economy? Musk is a joke! He’s like a petulant trust fund child who’d rather play with rockets and dream instead of working day in and day out making Tesla a profitable company.

Tom T

Mar 28, 2018 at 12:09 pm

Contemplation of Elon Musk never fails to bring to mind that he will end up being legendary … just as PT Barnum and Diamond Jim Brady are.

TJ Martin

Mar 28, 2018 at 1:03 pm

I’d add at least one more to that list that is perhaps more relevant to the subject of automobile manufacturing ;

As I’ve clearly stated almost from the beginning : in more ways than one Elon Musk is the John Z. DeLorean of the 21st century

R2D2

Mar 28, 2018 at 4:26 pm

TJ Martin: About the DeLorean:

“The car (DeLorean ) was named the DMC-12 because of its intended price of US$12,000. In 1981, a DMC-12 had a suggested retail price of $25,000 ($650 more when equipped with an automatic transmission); this is equivalent to approximately $67,295 in 2017.[28] There were extensive waiting lists of people willing to pay up to $10,000 above the list price; however, after the collapse of the DeLorean Motor Company, unsold cars could be purchased for less than the retail price.”

Realist

Mar 29, 2018 at 3:15 am

Musk is probably one of the very best spin doctors around. A big difference between Musk and Delorean is that Musk knows how to line his pockets, while Delorean had to resort to drug trade in a futile attempt to save his car.

Dan Romig

Mar 29, 2018 at 11:18 am

DeLorean was screwed over by the unions who supplied his companies’ parts because they were afraid that stainless steel cars wouldn’t need replacement and that workers in the auto industry would laid off if stainless took over. That’s why he needed cash to keep operating, and the drug deal was a set-up he fell for. The fix was in.

Three plus decades later and we still don’t have cars made with a little nickel and ferro-chrome added into the body work’s alloy.

d

Mar 29, 2018 at 5:10 pm

“DeLorean was screwed over by the unions who supplied his companies’ parts because they were afraid that stainless steel cars wouldn’t need replacement and that workers in the auto industry would laid off if stainless took over.”

Unions are part of the leftism that long term NEVER WORKS.

That dosent mean we should invent and perpetrate fairy stories about them.

Ford have made many stainless cars, they are in the Ford museum.

Stainless cars are impractical, and so not MASS made (Delorians were never, and never to be, MASS made), for 1 simple reason.

Stainless is to Hard/Harsh on the machine tooling, so radically shortening the life span of the tools, putting up costs horrendously.

What you say about unions and stainless, would also apply to plastics.

If Delorian was screwed by anybody. It was the US Govt who set up the entire Drug transaction and entrapped him. If you watch the video of the transaction and event (if it is still available) Delorian touched the case containing the drug’s, ONCE. He was the only non FBI/DEA agent associate in the room. Today that case would not fly, and only flew then in the CORRUPT US where Entrapment is legal.

Delorian did not go looking for a Drug deal. The US govt pushed an Entrapment Drug deal to him, and got away with it.

steve

Mar 29, 2018 at 7:04 am

1. They made electric cars acceptable, even popular. Not choking down on NOx is something everyone can look forward to.
2. They made interior car design simple, my car has 100+buttons hidden in every nook and cranny. I would like to concentrate on the road, not look down to try and find number 6 of 8 identical buttons that switch on the demister.

Nick Kelly

Mar 30, 2018 at 1:38 pm

It would be unusual in corporate history if this happens. The usual fate for this kind of failed expansion is the disappearance of the co. It can’t get back to the niche it should never have left. It has no money and the cache of the niche has been damaged by the failure.
If Musk is willing to risk the last of his personal stake, maybe, but may have to re-brand (Elon?)
It’s a bit odd how blase the guy is about almost going bust in 2008.

One hope for T might be a joint venture with an outfit that doesn’t have to learn mass production because they already do it. Hyundai?
You can bet the latter doesn’t have a robot installing the glove compartment. (See piece under Tesla re: their over-emphasis on automation)

I am one who hopes Musk survives what looks like the Model 3 disaster.
Seeing the rocket return to earth like a slo-mo reverse of take- off was a mind blower. To take on govt and become the go- to outfit for space launches? Wow!

Mass production of cars seems so boring by comparison and may kill the exciting stuff that has a bonus: a profit.

Tim

Mar 28, 2018 at 8:17 am

The prevalence of “cash burn” is almost nostalgic – reminiscent of the dot-com bubble.

It would be very interesting to know how pevalent cash-burn now is, and much of the market is made up of cash-burners.

polecat

Mar 28, 2018 at 7:07 pm

I think our good host misspelled the sub-header :

I believe the term is ‘crash-n-burn’ machine …
‘;]

Bead

Mar 28, 2018 at 8:19 am

Imminent capital raise, o ye of little faith, so long as we have legions of Silicon Valley millionaires. But sell your shares soon because the boat is springing leaks.

Jack and J Bank .. actually … in the flesh … they do not what with their substandard materials , fit and finish and their Yugo quality paint jobs . Not to mention an inditigngishalble profile and snout leaving one in doubt as to what one is seeing from say .. twenty feet or more

Dan Romig

Mar 28, 2018 at 4:56 pm

“… 1987 Yugo, a Yugoslavian import donated to the department as a test vehicle by the government of that country and reflecting the cutting edge of Serbo-Croatian technology.” -Joe Friday

NY Geezer

Mar 28, 2018 at 8:43 am

I thought is was understood that the development in Silicon Valley of a hybrid public/private economy in which the DOD of the U.S. government assists in the creation of new technologies it needs for national security operations. It does this by investing venture capital in companies that can commercialize these technologies.

Tesla is one such company. Its driverless cars incorporate, test, and improve technologies devised for missile guidance systems and unmanned drones. Fatal crashes, car battery fires, annual loses, lack of profit, lack of cash flow, minuscule car production and lousy credit ratings have not really ever harmed Tesla. The DOD has its back.

Yeah you get TWO points here. During the previous admin car makers had the presidents support; Government Motors? There may have been doubt that the USG PUT on US automakers extended to 45, though he is noisy about protectionist measures, he is also going to put the bite on US automakers foreign operations. Then HE proposed asking DOD to build the border fence, which opens the door to a lot of things, like W3. Remember the automakers were nationalized into the war effort in W2. That effectively was what broke the union movement from the 30’s in America. And Tesla makes rockets, which makes them a national security interest.

Sure – you can only do so much testing with this stuff in a lab out in the Nevada desert especially with the guidance systems since “they” use a wholly different coordinate system beyond anything we’ve seen before. It’s not a coincidence the gigafactory is out there, right?

Bookdoc

Mar 28, 2018 at 8:47 am

I have felt that Tesla will eventually be used to describe a business model, like Ponzi and Enron…

If you think the tax law is stupid (I do…) then lobby to change it. A little pump-priming for EV is probably ok, but enough is enough.

Netflix, Uber, Lyft, Blue Apron and a couple hundred other highly unprofitable companies operate like this. I have no problem with people wanting to piss way their money like this; I do object to egregious tax subsidies.

Nicko2

Mar 28, 2018 at 8:48 am

Sales of Teslas are up year on year, giga-factory going full steam ahead. Buy the dip!

Question, Wolf: it’s reported that thousands of people have placed large deposits with the company toward future delivery of a Tesla: do those people become unsecured creditors in the event of a bankruptcy?

fozzie

Mar 28, 2018 at 8:19 pm

“Sales of Teslas are up year on year, giga-factory going full steam ahead. Buy the dip!”

The Q1 delivery numbers to be released next week should put to rest any lingering doubt that Tesla’s growth story is over.

“do those people become unsecured creditors in the event of a bankruptcy?”

Yes. Their money wasn’t placed in escrow. Given what manufacturing assets typically fetch for the secured creditors in a bankruptcy, I’d guess deposit holders would be looking at a goose egg.

My understanding is customer deposits are unsecured. They amount to $854 million, auto and solar combined. Model 3 deposits on their own are much smaller.

If there is a “run on Tesla,” as freaked-out customers are asking for their money back, it would pull out $800 million from Tesla’s cash position, if Tesla pays, which I doubt. This would be the beginning of the end because now other creditors get spooked, and investors will turn off the money spigot.

DV

Mar 30, 2018 at 8:33 am

No wonder, they just announced a recall of 120 thousand cars. The cause – rusty bolts!

If you have rusty bolts on 120K car, even war on diesel won’t be much of help.

The only difference is discharge rate. We call a battery that discharges rapidly a “bomb”.

All of this applies to nukes too.

james

Mar 28, 2018 at 9:40 am

This car is hand built like a Rolls Royce. Just remember that. Well, at least the parts that can’t be robotically made.

Cameron S

Mar 28, 2018 at 9:47 am

A study of the financials of Tesla and it is difficult to come to a conclusion other than this Company is headed into bankruptcy in the not too distant future. The Company’s share price is absolutely ludicrous (the product of fairy land hype and lots of irrational bubble and froth) and should be something well below $20 based on it’s terrible financial performance over the past 3 or so years which shows no sign of any kind of significant turn around in the foreseeable future.

It’s a shame. A US manufacturing business that employs a lot of people is what we all want to see do well and prosper.

zoomev

Mar 28, 2018 at 10:11 am

“When will investors get tired of feeding their capital into this cash-burn machine?”

When man stops buring the earth?

zoomev

Mar 28, 2018 at 10:12 am

“..Model 3s now driving around out there appear to be beta-versions”

Just like VW.

JR

Mar 28, 2018 at 10:27 am

The true value of a gallon of gasoline is around $3K USD. That is what you would pay one human with a human-powered saw to cut wood, versus what the gallon can do in a chain saw run by the same human. This suggests that gasoline is one of the most egregiously underpriced commodities on the planet relative to its utility. Only diesel has more Kwh/gal than gasoline. Electric cars still need a much more developement to get the safe energy density developed to compete with gasoline. Gasoline is said to be 100 times more energy dense than current batteries. Maybe fusion power will arrive first. After its introduction in the 1964 worlds fair – 54 years later it is still a research project.

Javert Chip

Mar 28, 2018 at 10:59 am

JR

“…This suggests that gasoline is one of the most egregiously underpriced commodities on the planet relative to its utility….”.

Of course, the other way to look at it is some (actually almost all) people are smart enough to use the right tool for the job (eg: don’t eat vegetable soup with a screwdriver).

It’s called productivity, and it’s a huge component of improving standards of living.

Well that’s a bit unfair; gasoline is not “safe” at all, and certainly much more dangerous than any decent lithium ion battery.

Matching the energy density of gasoline with the safety of LiON batteries is a very tall order.

> Maybe fusion power will arrive first. After its introduction in the 1964 worlds fair – 54 years later it is still a research project.

Fusion has been around at least as long as the sun has been shining, and it’s still powering nearly all biological processes on this planet.

Laurence Hunt

Mar 29, 2018 at 1:09 am

Fusion has advanced to R&D. Output is advancing more rapidly than Moore’s Law. Frank Chen is assembling his book on toroidal plasmas. ReBCO wire is in production. At least a dozen compact fusion projects are in progress. Several companies are talking prototypes by 2030. Check the MIT website. The math says yes, due to high temperature superconductors.

Nick Kelly

Mar 30, 2018 at 2:15 pm

They are talking a prototype 12 years from now?
That’s amusing.
The Manhattan Project took just over half that long from pure theory to function.
If you are talking about a prototype more than a decade away you don’t know the theory of its operation.

As for someone working on a book about toroidal containment of plasma: (containment with mag fields instead of metal container) he will have to reference a lot of work done by the USSR.

Moore’s Law (a misnomer since a Law can’t be otherwise) already no longer applies to the field it described, the cost of computing power. The more aptly named ‘law of diminishing returns’ overtook it some years ago.
Even without referring to market reality, ‘Moore’s Law’ is a theoretical impossibility. It posits a physical (not a numeric) process extending geometrically to infinity.

LouisDeLaSmart

Mar 28, 2018 at 11:33 am

\\\\
You cannot make a good car ,or anything for a matter of fact, with bad management. And management in high-tech in the US, with a handful of exemptions, is dismal. Maybe even worse then wallstreet!
\\\\
I once worked in a group where they had the 8 year rule. If you are a manager (at or above a group leader position) you need to stay there at least 8 years before proceeding further into higher pay-grade levels. This sounds tough, but the manager has to carry the weight of one’s own decisions long term…no short term gains for long term loses allowed. They especially avoided people in management with 2-3 years “hop-time”.
\\\\

unit472

Mar 28, 2018 at 11:35 am

I’m not a gear head so I’m curious if Tesla’s ( assuming the brand becomes defunct) will even have any collector value.

I assume you cannot just store an EV for 20 or 30 years and charge it up and start driving and its a reasonable bet battery technology will change over the same time frame so getting new battery packs for a 25 year old Tesla would be a major problem.

This gives Tesla and other EVs a real problem in the vintage car market. You can have a part made for a 1931 Cadillac if you can’t find a spare but you may not be able to do anything that would keep a Tesla running once there are no more OEM parts.

Laughing Eagle

Mar 28, 2018 at 3:35 pm

Looking at the pictures posted by Jack, they show many detached or broken axles. I think that is the problem with Tesla cars, they do not have a long time frame to adequately determine the quality of the structural design and quality of the parts. And if Tesla becomes the next DeLorean, these cars could be parked for the lack of parts.

There are similar pictures of broken wheels of other brands. Only a lot more of them. Just ask an insurance adjuster. Collisions can impact every part of the car, depending on what the car hits or gets hit by.

Prairies

Mar 29, 2018 at 11:11 am

I was thinking the same thing, all of the pictures I saw had an impact on a panel in front of or behind the wheel, check any salvage yard and the same results will be found with all vehicles. If you hit a part of a car, it tends to end up removed from the vehicle in a rough fashion.

DK

Mar 28, 2018 at 12:30 pm

Do they have any battery technology in the works that may be of greater value than making a car?

The battery cells are made by Panasonic, which owns the IP. Tesla buys these cells from Panasonic. Tesla’s technology is about putting the cells together and controlling them. Not sure how much that’s worth to other automakers. Every major automaker has EVs on the market. They all have their own technology.

Tesla’s battery isn’t that much better than the Chevy Bolt’s battery and is more complex. Also, it comes at another cost:

However, there is one caveat to all this. We have not included the weight of the case in our calculations and Tesla’s case may be heavier than the Bolt EV case. Why? Because Tesla’s battery chemistry is much more flammable than GM’s and it requires more armor to deflect foreign objects.

Mountain View’s Fire Department typically puts out a car fire in minutes. But according to Chief Juan Diaz, this is the first time the department has had to deal with a Tesla battery that was split open and on fire.

Made up of more than 7,000 individual cells, many of them strewn across several lanes of the freeway, the battery was both an electrocution hazard and a fire hazard, the chief said. Lithium-ion batteries damaged from impact can go into a state called “thermal runaway.”

“The battery itself overheats, the plastic components that separate the modules of the battery begin to ignite, and eventually, you wind up with a battery that is on fire,” he said, adding that lithium ignites at a temperature of more than 900 degrees Fahrenheit.

Chief Diaz said the fire department considered dousing the battery with the recommended 3,000 gallons of water, but that would’ve required stopping all traffic to run a hose across the freeway. Another option would’ve been to let the fire burn itself out — but firefighters also decided against that.

This is going to be a big issue going forward.

Another consideration is that GM and other established automakers are relatively new to the world of EVs – they might leapfrog Tesla in a few years if they are making batteries almost as good and apparently in some ways better already. Finally, it should be noted that Panasonic owns the IP around the battery technology.

WES

Mar 28, 2018 at 5:48 pm

A while ago I looked up Tesla’s wheel motors and was shocked to find that they are not the most efficient type of electrical motors available. Chinese electric cars use more efficient wheel motors. This means Tesla has to install larger and therefore heavier battery packs than the Chinese do.

As an electrical engineer I could not find any technologies where Tesla has an edge. Certainly not in batteries or electric motors two important components of an electric car.

Despite my electrical background I am no fan of electric cars because of their inherent system inefficiency. The problem with electrical cars starts from the creation of electricity to charging the batteries to creating mechanical energy to move the car. This process’s inefficiency can be as low as 15%.

What people fail to take into account are the total system energy losses from generating electricity from a fuel, transmission losses, converting electrical energy into stored chemical (battery) energy, then converting chemical energy back into electrical energy, then converting electrical energy into mechanical energy to move the car.

In terms of efficiency, a gas engine easily beats an electrical battery/motor system and is the main reason we mostly drive gas powered cars!

MF

Mar 28, 2018 at 12:36 pm

I suspect previously-cheerleader-investors are quietly selling and moving onto the next thing which is already being quietly bought up and is rising slowly under the radar. We’ll hear about it once insiders have secured sufficiently sizable positions.

Meanwhile, it doesn’t matter anymore. Mr. Musk has plenty of room to maneuver. The Tesla name is now a marketable property in and of itself. Besides, if TSLA really takes a dump, the economy can be blamed with recent market volatility offered as proof.

C Jones

Mar 28, 2018 at 1:08 pm

So what should we make of Musk’s ongoing hype about the company? Is he being honest?

breamrod

Mar 28, 2018 at 1:26 pm

the stock looks like it’s put in a major top. Look at the chart. All of that distribution between 300 and 370

Jay Reard

Mar 28, 2018 at 1:51 pm

Tesla’s acquisition of SolarCity will resurface as flat out fraud and corporate mis-governance. Elon borrowed from pete to bailout paul

“Fraud” is fairly well defined. If he is convicted of fraud, or settles fraud charges, you might call him a fraud. But that hasn’t happened yet.

If Tesla shares and bonds collapse, there will be a lot of litigation. This may lead to some judgments and settlements. I’d reserve my judgment until then.

Delikon Threetree

Mar 28, 2018 at 2:49 pm

Elon Musk is going to be the next DeLorian.

Rcohn

Mar 28, 2018 at 4:04 pm

Tesla is the best example(among many others with Nflx,Amzn in the first row) of the disconnect between the actual and future
business of a company and the company’s stock price.Some of these companies will declare chapter 11 while others will survive, but the stock of ALL of them will decline by very large %s.Investors will look back upon the recent period as one in investors collectively lost their minds in search of yield

R2D2

Mar 28, 2018 at 4:16 pm

How ignorant analysts at Moody’s can be? Have you considered the huge potential market for Tesla on the Moon and Mars? Musk is already fluent in Martian and is negotiating with them to supply Martians with Model 3. I can’t stand ignorant people who can’t see the big picture :).

Duke De Guise

Mar 28, 2018 at 7:08 pm

And, bruh, you know the babe’s at Elon’s bars and nightclubs on Mars are gonna be wicked hot!

R2D2

Mar 29, 2018 at 4:57 pm

Duke De Guise Why do you think I’m such a big fan of Musk? He’ll lead us to those Martian hotties :).

Duke DeGuise

Mar 29, 2018 at 10:07 pm

I’m all in, baby!

I believe!

Where can I put a deposit down?

Shawn

Mar 28, 2018 at 4:26 pm

The 101 crash of a Midel X shows the car is a death trap with those insane falcon doors. Even if it was human error the doors failed to open trapping the driver inside a burning vehicle.

Enrique

Mar 28, 2018 at 4:48 pm

I never liked companies like this from a trading standpoint, as they make sense neither from a fundamental nor a technical standpoint. As to the former, Wolf illustrates the points well.

As to the latter, they are just too jumpy and volatile and subject to headline risk to fit neatly into any systemised trading regimen.

I imagine headline-reading algos just run wild on this thing as well.

JB

Mar 28, 2018 at 5:10 pm

the lithium batteries are the weak link in this iteration of EV vehicles. Lithium is highly volatile in its natural state and is stored in mineral oil because the metal will ignite when it comes in contact with water. A challenge for early battery developers was to create a seal or non permeable enclosure around the volatile core. It is my understanding is that this seal is so difficult to breach that it prohibits recycling of the lithium stored inside. So what are we going to do with the old batteries ? Emergency responders will also have to develop new technologies to put out the flames in the event of a crash and subsequent battery ignition.

Dana Batley

Mar 28, 2018 at 5:30 pm

The difference between genius and stupidity is that genius has it’s limits. A.E.

its a bit on the dangerous side to short now. TSLA has a smaller float which makes it very, very, volatile. Bad timing and it rips your face off. I trade for a living and I don’t touch this stock. Too volatile, news sensitive, and a cult stock. I just watch it like some wild exotic animal. We all been expecting its exposure as a fraud. Free money, and the usual wallstreet story bs hype.

The insanity we call Tesla is simply the result of the Fed’s ZIRP. Zero interest rates basically means money has no value (i.e. it is free). Zombie companies built with free money will collapse when money stops being free.

raxadian

Mar 28, 2018 at 11:08 pm

As FED rates rise, zombie unicorns sink.

It’s the final count down for Tesla.

The final countdown
The final countdown
The final countdown
Oh
It’s the final count down
We’re sinking together!
The final count down
We’ll all cry so much
It’s the final countdown
It’s the final countdown
Oh
It’s the final countdown, Tesla!

No clue how long it will take them to sink. I hope is not another “I am slowing dying” like yahoo was… or maybe is? Is there anything left of yahoo besides the e-mail?

Fun fact; they used to own Tumblr but failed to monetize it when it was cool.

Kasadour

Mar 29, 2018 at 1:59 am

Tesla never hits its targets. It overpromises to hype its shares.

Surely Tesla has a legal dept. Any decent lawyer will always advise to underpromise and over deliver, however that does not make for good money raising (read:raising not making).

This could be the basis for a fraud action against Musk personally.

Also, will he be allowed to abscond with invester monies? If Tesla ends up in bankruptcy, Musk’s personal assets should be scrutinized and should be turned over to the trustee. It depends on what chapter bankruptcy he ends up filing. I can’t imagine he will be permitted to personally benefit from investor money.

Scott

Mar 29, 2018 at 11:44 am

I’m surprise that this hasn’t been posted, it’s a few weeks old, but the accounting chief left for “personal reasons.” Does anyone believe that the reason is true?

The worse Tesla’s financial position becomes, the more attractive this and similar deals become.

WES

Mar 29, 2018 at 5:57 pm

Post Mortem

Apparently this Tesla X car was driven by an Apple engineer.

There is an engineering joke that goes something like this.

Three people a manager, a mechanical engineer, and a software engineer were driving a Tesla car on a road down a mountain when the brakes failed. The car careened out of control half way down the mountain before it came to a sudden stop. Luckily no one was seriously hurt.

The manager suggested holding a meeting to decide what to do next. The mechanical engineer said no because that never worked but that he had a Swiss army knife and could probably trouble-shoot the problem and fix it in five minutes. Then the software engineer suggested that they push the car back up the hill to see if it would repeat!

Apprently the Apple engineer had taken the Tesla car in to his Tesla dealer complaining about this vary software problem!

Sadly we now know he was likely a software engineer who should have known better than trust any piece of software with his life.

Christoph Weise

Apr 2, 2018 at 12:29 pm

Is model 3S good enough to earn Tesla enough money to fund the development of the successors to current models?

The Model 3 is the biggest cash-burn machine Tesla has. Tesla loses a ton on each Model 3 it produces. The more it produces, the more cash it burns. The Model 3 would have to be able to generate positive cash flow before it could fund anything else. And the Model 3 might never be able to fund itself, much less anything else.

Prairies

Apr 2, 2018 at 4:07 pm

His April Fools bankruptcy joke might not be as funny when he loses all his unicorn funding as credit gets tighter, and rates go higher.

Reality will set in, I don’t think there are enough drugs on the table to keep the dreamers in a haze until 2020.